Sony PlayStation Business Struggling, Mass Sackings As Revenues Fall & Microsoft Moves In For The Kill

As the dust settles on the Microsoft acquisition of Activision Blizzard, cracks are starting to appear over at archrival Sony PlayStation, and Sony Interactive Entertainment who after splashing out $3.6 Billion for gaming Company Bungie, were forced to initiate layoffs at a Company that was in trouble even before Sony acquired the business, SonyPlaystation console sales are also falling and Sony Group executives have moved to take back control of the business.

Some Bungie employees that were laid off were told that if the Sony buyout did not happen, that with the current performance of Destiny 2 the studio itself would have been in jeopardy if they were still independent.

The next major Destiny 2 extension has been pushed back to mid-2024 with the possibility it could slip further following the layoffs.

As for their new title Marathon that has been pushed into late 2025.

Shortly after Sony PlayStation acquired the business it was revealed that Destiny 2 had missed revenue targets by some 45%.

Exact numbers haven’t been disclosed, but over 100 of the company’s roughly 1,200 staff were given pink slips by management.

In the past Sony has acquired Studios including Insomniac, Naughty Dog, Sucker Punch, and Guerrilla Games were bought out after years of working increasingly closely with Sony, effectively functioning as Sony “second party” developers for a while before being brought in-house as first-party studios.

Now the gaming market has gone soft with PC hardware manufacturers reporting double digit declines.

There’s also been a reported 6,000 jobs lost in 2023 so far in the gaming software market.

Brands such as Ubisoft were forced to cancel games and restructure the business, Volition close down, Epic cut more than 800 staff, and redundancies at Bungie, Relic Games, Creative Assembly, BioWare, Embracer, Team17, Media Molecule, Microsoft, Frontier, Twitch are still continuing according to Games Industry Biz.

Sony’s new gaming handheld, the PlayStation Portal, will not be released in Australia alongside its U.S. launch.

During the past three years Sony PlayStation has struggled to deliver consoles.

Supply chain problems that plagued the PlayStation 5 for three years have now been resolved, claims management.

The global chip shortage which began in 2020 impacted industries from car manufacturing to credit cards.

Customers who were frustrated at month-long waits for the PS5, have moved on to PC gaming and Microsoft’s Xbox.

The shortages have been steadily resolved through 2023, and Sony said its supply chain is now getting back to normal.

In their latest financials Sony Group reported that its PlayStation business was losing steam and market share.

Sales of PlayStation 4 and 5 titles fell from a year earlier and playtime plunged 15% in the quarter.

Sony boss Eric Lempel recently announced that the business has redesigned its PlayStation Plus subscription service, adding cloud gaming for PS5 games in an effort to compete with Microsoft.

Microsoft’s own subscription service, Game Pass, allows players to stream some of the latest games to both PC’s and Xbox consoles.

Games Industry Biz claims that the cost-cutting at Sony PlayStation gaming subsidiaries is itself a hell of an interesting thing for the company to be doing, given that its studios are essentially the only reason why the much smaller and less wealthy Sony is considered capable of maintaining market leadership in the face of the now-gigantic Xbox division Microsoft has spent most of Sony’s market cap assembling.

Whatever your view of the Activision Blizzard acquisition, it is now a done deal, and Sony needs a bold strategy to ensure that it remains competitive not this year or next, but five and ten years down the line. Sending in the MBAs to “find efficiencies” in the world-class studio system it has spent so much time and effort assembling sounds like pretty much the opposite of that.

Despite the layoffs and massive cost cutting impacting the gaming industry, and recent moves by Microsoft to expand their gaming operation serious questions are being asked about Sony PlayStation who has a poor reputation in Australia when it comes to customer service and warranty issues.

The Federal court ruled that Sony PlayStation broke the consumer law by denying customers refunds for faulty PlayStation games, the court ordered the company to pay a $3.5 million fine, after the Australian Competition & Consumer Commission went after them.

Observers claim that their current cost cuttings and sackings will be cold comfort for Sony in a few years’ time if penny-pinching leaves its studios unable to maintain their edge over the company’s much larger, hungrier, and more aggressive rival Microsoft who recently concluded a deal that saw them spend over $70 billion buying one of the industry’s biggest publishers, Activision Blizzard with the explicit goal of destroying Sony’s market share.

Currently Microsoft is pulling out all the stops to grow their studio network and build out an even more impressive software pipeline, that will seriously hurt Sony going forward according to analysts.

GIB claims that Sony needs to start answering some pointed questions about what it’s going to do instead – and that what’s going on at Bungie is going to be watched carefully as a bellwether for the company’s thinking.

Back when Sony acquired Bungie, the concept of releasing its games on non-Sony platforms, and thus playing a role in expanding Sony’s software reach beyond PlayStation – was a very big part of the narrative, now that’s being bought into question.

Some claim that the US$3.6 billion spent buying Bungie now looks awfully mis-spent, and this studio’s role in Sony’s fairly unclear strategy becomes even more questionable.

As things start to look desperate at Sony PlayStation, Sony Group President Hiroki Totoki has moved to double duty by taking control of the PlayStation subsidiary.

He immediately sounded a warning on the video game segment’s earnings downturn and that things were not looking good for future earnings.

Totoki is now chairman of Sony Interactive Entertainment.

with former CEO Jim Ryan leaving the Company Totoki has become “interim CEO,” Sony said.

Sony has long given wide decision-making latitude to SIE’s management team. By taking direct leadership of SIE, Totoki may be signalling tighter cost controls are ahead for a unit that has spent heavily on game development and acquisitions in the past.

Totoki also holds Sony’s purse strings as the Japanese group’s chief financial officer. When presenting quarterly earnings last November, he sounded a note of urgency over the gaming segment’s earnings slump.

“Our biggest regret is that we have made a significant downgrade to the operating income forecast” for the second straight quarter, Totoki said during the earnings call.

The risk to PlayStation isn’t on a two to three-year horizon, but beyond that. If the company doesn’t have a clear strategy for how it will build and grow, not trim and cost-cut, with a view to being a serious competitor in the decade to come, then even its commanding market lead today may not be enough to carry it through tomorrow.